The Office of Utilities Regulation (OUR) has come out in defence of the Jamaica Public Service Company’s much-maligned kVA (kilovolt amperes) charge, applied to commercial entities and blamed for helping to drive many of them out of business.

Electricity providers’ prices are comprised of demand charges and energy charges. While energy charges are based on the cost of generating and acquiring the energy provided (for example, fuel), demand charges are based on delivering the energy to consumers and are measured in kVa.

According to the JPS, the demand charge is the peak instantaneous power (lasting 15 minutes or longer) supplied to the metering point over the billing period. It says the applicable charge rate is applied to the highest value in a six-month window including the billing period.

Basically, big companies are charged for the capacity it causes JPS to invest in to facilitate those entities’ relatively higher consumption patterns, says OUR deputy director general Maurice Charvis.

“The system of the demand charge is that if you run up your kVa for one month, you have to continue paying for a while… the system has to be planned for that one customer, not just for the regular customer because when that one customer demands power and doesn’t get it, everybody loses power,” said Charvis.

“Suppose you were running a taxi from Kingston to Mobay with five regular customers, so you buy a five-seater taxi… If another customer comes once every six month and also wants to go to Mobay, in order to accamodate him, you buy a 10 seater taxi,” he explained. “Who is to pay for that additional cost of transportation? Is it the five persons or the other customer? That is the concept of the demand charge.”

Members of the OUR were guests at the Observer’s weekly Monday Exchange.

Indeed, it is the kVA charge that the owners of Jo Jo’s Farm Market in Kingston recently blamed for massive electricity bills — amounting to over $2.5 million in a few months — that eventually forced them to close. And president of the Micro, Small and Medium Enterprises (MSME) Alliance, Professor Rosalea Hamilton said at the time that she is aware of other businesses going belly up or being pushed to the brink of folding because of their inability to pay “extortionary light bills” as a result of the kVA charges levied on business consumers’ bills.

“Most businesses do not understand the nature of the charges and can’t monitor and control and effectively manage this charge so that it doesn’t become oppressive and lead to the kind of problems we are talking about, such as business closure,” she said, adding “The second thing which we find very disturbing, is that if JPS comes to disconnect a meter for non-payment of a bill, or whatever reason, those kVA charges continue to accrue (while the premises is disconnected).”

But OUR director-general Zia Mian, in JPS’s defense, insisted that it is unreasonable to expect the electricity provider to bear the cost of investing in capacity to support big businesses.

“The investment has to be made today in order to supply your demand tomorrow, and if you say that I’m going to demand so much capacity, the (provider) has an obligation to put that capacity there,” argued Mian. “At the end of the day, whoever makes an investment must have some return.”

Furthermore, the OUR director-general said businesses have an option to put up their own plant.

“But if the provider puts the capacity, that demand charge has to be met,” Zia Mian said.

“Somebody has to pay.”